Skip to main content

tv   First Up With Angie Lau  Bloomberg  August 11, 2015 7:00pm-8:01pm EDT

7:00 pm
7:01 pm
7:02 pm
guest: china's already expanded the debt swap program to aid local government financing. so that's going to exacerbate the debt picture. they've injected funds into policy banks. so they can channel more, you know, liquidity into the real economy. and now they've devaled the juan. so they've looked at the interest rate cuts that they've done since november. have not had a real impact on slowing or improving the slowing economy. so now they have, you know, altered their currency policy. again, remember, exports make up -- it's less now. but it makes up still about 22%, 23% of g.d.p. used to be as high as 30%, 35%. it's come down. still a significant chunk. they are coming in to the aid of exporters right now. there are risks, of course. we've seen in the beginning part of this year and last year the outflows have been exacerbated from china. this will further worsen that
7:03 pm
trend. for every -- this is bloomberg intelligence, estimates every 1% depreciation of the yuan will trigger $40 billion of outflow. so this nearly 2% fall in the yuan yesterday, that's going to trigger another $80 billion in outflows and pboc will then have to intervene to kind of prop up. they've already whittled down some of their foreign exchange reserves. there's a lot of knockdown effect on this. andreas: whether or not they're going to do that a-- angie: whether or not they're going to do that ahead of the yuan, right? guest: yes. it's two-fold. on the one hand, they came out with statements yesterday saying, these -- this is a one-off adjustment. put that aside. on the other side, we're doing a number of steps to make the fixing -- the reference rate more market-based and more transparent. another step towards full convertability. but again -- angie: most important is to refer to yesterday's closing spot rate as a new fixing rate
7:04 pm
reference point. guest: yeah. it's interesting whether these moves will have much of an impact on the i.m.f.'s review later this year. we're expecting for the yuan to be included in the s.d.l.r. because the bottom line is, -- s.d.r. because the bottom line is the yuan still is not fully convertible. this is just another example of china acting as it has in the past with its hand on the tiller, on the currency. angie: let's do market check right now of markets in asia. trading to new zealand on the heels of wall street's reaction to that yuan devaluation. new zealand under pressure right now, it's at .6%. new zealand dollar spot bouncing back after falling quite a bit as a result of china's devaluation. of course new zealand and australian commodity currencies big hits as china factors in as their biggest trading partner. we're also counting down to the openings in other markets.
7:05 pm
let's head over to japan. nikkei 225 closed in red on china's devaluation. futures in chicago pointing to a lower open. dollar-yen right now is slightly strengthening. still very low there. one closed market to tell you about, there is no trading in thailand today, where it is a public holiday for the queen's birthday. but let's take a look at how all the u.s., yed out in with bloomberg news stock reporter. what can you tell us? reporter: well, as you expected, today was all about china. u.s. stocks didn't exactly like the yuan devaluation. the s&p 500 slipped 1% as investors saw the move of a sign of how deep china's slowdown actually is. that was evidence across other markets with the commodity prices plunging. one good piece of news could be the effect on the federal reserve's grand plan for raising interest rates.
7:06 pm
we saw 10-year yields on treasuries decline to the loft in about three months. which signals -- lowest in about three months which signals investors could think this pushes out the fed's fine line for tightening monetary policy and the fed has said it will take international developments into account in deciding when to tighten. so that is a bit of good news for us, especially because u.s. stocks seem to ebb and flow with the fed's plans these days. the news out of china didn't bode well for stocks such as general motors, ford, apple and tiffany and co-. all of which rely on china for a sizable chunk of revenue. all of these names fell at least 1.9% in trading because devaling the yuan reduces the value of u.s. companies' sales in china and makes the nation's producers more competitive. angie: all right. thanks for that. wrapup of wall street action. let's continue this conversation right now. and bring in david. pboc's move was felt across the
7:07 pm
globe as we enter day two. what can we expect? guest: how do you make money, how do you lose money? certainly it's a theme that was fleshed out right away. right before -- at least right after they announced it. we saw the immediate currency reaction, then stocks. the f.x. markets across asia sold off. stocks, winners and losers. let's start off in china. the dynamics we talk about here, similar to anywhere in the world. industries that typically have a high portion of their debt and cost in foreign currency. the airlines got absolutely whacked yesterday. they borrow in u.s. dollars to pay for their calf ex. they pay oil in u.s. dollars. it was a horrible -- i think china saw an 18% lower. for every 1% drop, this is according to their financial statement last year, every 1% drop in the yuan erodes about $120 million u.s. from their bottom line. those industries that export capital goods, that's a positive
7:08 pm
for them. these industries have pricing power, heavy machinery to a lesser extent, some of these car makers in china, the cherries, for example. but the exporters, that's really seen as one area that's really poised to benefit from this. those that get a big portion of their sales from selling abroad. i think yesterday we saw a big op in len oveow -- lenovo. a caveat to this, an increasing number of these companies have started to settle or transact which is a bit more difficult to say what their currency exposure would be in this space. angie: you mentioned currency war. nobody officially wants to use that moniker. but of course a lot of people saying that japan has been getting a free ride for a very long time. maybe now china's stepping in. guest: is this going to be the race to the bottom as china has joined in on this? look at some of the regional currencies and the reaction
7:09 pm
yesterday. the singapore dollar, the yuan was down 1.3%. singapore dollar down to a five-year low. the global financial crisis, it's down about 12% this year. would you think, of course, it could maybe help exports. but this is not really an export-driven economy. malaysia. so this is going to be a problem. we have one analyst who was quoted on bloomberg as saying, we have a full screen quote, it will start a vicious cycle by different countries trying to depreciate their currencies. a double whammy because we have expected tightening of the fed and now this currency war driving to the bottom in asia. guest: it's interesting because i think for the next few days, they're expecting that we might ctually see the -- see it fall further. angie: then that would not be a one-time fixing rate. questioner: what combsh guest: what they're say something because more people may be convinced that it's no longer a one-way bet, people will start positioning against it.
7:10 pm
angie: and really reflect more market opinions rather than fixed. guest: we heard from a very noted advisor, former advisor to the pboc and the chinese government, believe he's in beijing, he said the era of yuan appreciation is over. angie: i think you already mentioned the losers, right? guest: i think the foreign companies. that's the other thing. for people who are looking to get or got into the apples, the b.m.w.'s, absolutely whacked again yesterday. foreign car makers, for example, get a big, big portion of their business. so not only in europe, you look at the fords, for example, the g.m.'s in the u.s., took a hit. yum in particular. when earnings come out, big exposure to china. angie: more than 50% of its revenue. guest: it's a very big market. i think there were others that got hit yesterday. this is where you start to differentiate apple andum. apple has more pricing power.
7:11 pm
fried chicken, you can just switch. an iphone you can't get anywhere else. this also comes down to how they hedge their exposure to china. apple, for example, when the ruble went through the floor, i think it was last year, they immediately adjusted their prices in russia. i don't know how you can do that with fried chicken. [laughter] guest: we'll see. china has vowed they're going to keep the yuan stable and steady. we'll see if this is indeed a one-off devaluation and whether the trend is going to continue the other way. angie: makes day two one to watch. thank you so much, guys. of course you can get more on this story, big story of the day, probably all week, and in fact you can get all of the stories at our digital destination, bloomberg business, bringing together the best of bloomberg news, business week, bloomberg television and new digital content all at one address. also on
7:12 pm
yeah, we're talking about greece. it got its third bailout. and third bailout risks being held up by german lawmakers. how that may jeopardize the timeline ahead of a crucial bond payment next week. plus, what do insider trading and ukrainian hackers have in common? find out on check it out. coming up next, we're going to take a look at the impact of the yuan devaluation on asian currencies. that and more when "first up" returns. ♪
7:13 pm
7:14 pm
angie: australia's commonwealth banks a announced a $9.1 billion australian dollar profit, the largest ever by an australian ank. all australia's major banks are being required to strengthen their balance sheets against
7:15 pm
potential future economic shock. . e u.s. regulator the company says it's also working to maximize the number of vehicles repaired. takata air back -- air bags have been linked to eight delingt deaths now in the largest product recall in history. the defective inflaters can spray shards of metal on people on deployment. and car sales in china have fallen to a 17-month low, extending the slump in the world's largest auto market. retail deliveries were down 2.5%, despite steep price cuts and discounts. manufacturers are warning of potential price wars as china's economy continues to slow. today the markets now, china's devaluation of the yuan sparked a chain reaction in global markets. oil plunged to a six-year low. and that contributed to a 1.6% slump in the bloomberg commodities index helped by selloff in industrial metals.
7:16 pm
the dollar rose on the back of the selloff across asian currencies and that had the s&p 500 sinking by 1% in new york. just one day after its steepest rally since china. since may, rather. but it is all about china. it is on the brain. it's no freudian slip. let's get more with brian jacobson. he's chief portfolio strategy at wells fargo. joining us now from wisconsin. it's all china. what really -- tell me the moment that it hit investors and what was the reaction. guest: well, i think that it really hit investors when bloomberg broke it this morning as far as what china's move was. it's really in the premarket activity. i think it showed up first really in the trading of treasuries, futures, contracts and the such. we saw a big move down in treasury yields. because if china is going to continue devaling its currency, that means it's going to
7:17 pm
probably be buying up u.s. treasury securities. so that pushes the yield down. plus it might shift investor expectations about when the fed might hike rates. because now with cheaper yuan, it means that what we import from china is a little bit cheaper. so that contributes to disinflationary or maybe deflationary pressure. so i think it just created this kind of cascade of bad news and maybe a little bit of overreaction on the part of investors. that's the way that i'm reading this. i think that this is a one and done for the chinese government as far as its active role in pushing down the value of the yuan. angie: so they say. which is why a lot of china watchers and currency experts are watching this very closely. because at the end of the day, what, as you very accurately pointed out, china has done is export its deflation -- disinflationary trends to the u.s., whereas then it has
7:18 pm
imported inflation. right at a time when it needs it. guest: yeah and that's actually -- that's right. that's why i think that this was a very opportune time for the chinese government to do this. in fact, back in april we had warned invests that are this was likely going to happen. it was more a question of when, not if. and the big reason is that we know that the exports to china or exports from china have been falling. they also have very low inflation, about 1.6% year on year. so devaling their currency just kind of made sense. it will help boost exports, if it increases the cost of their imports. they get a little bit more inflation that way. so it makes a lot of sense on that front. plus then you have the i.m.f. coming out saying that the -- basically the chinese government needs to make the currency more freely floating. so it was actually perfect timing. that's why i view this actually as just investors or traders misreading what the chinese government is doing. the moment of truth will probably come within the next 24
7:19 pm
hours when we see how is china actually fixing the exchange rate and then also what's the industrial production and retail sales numbers looking like out of china. because a lot of people are interpreting this as meaning, maybe things are a lot worse in china than what it appears to be on the surface. so if we actually see a good industrial production number or something in line with previous expectations, around 6.5% or so, i think that we could actually see a reversal of a lot of these losses. angie: that's a great point. china is experiencing its deepest economic slowdown since 1990 here with gold growth of 7%. you mentioned that you thought, though, on wall street, there was a little bit too much of an overreaction. do you think that we're going to see a little bit of a bounceback when people start to settle down and perhaps look at some things that may have been oversold? guest: i do. i think that one of the key things will be to actually look at the data that comes out, how is it that china's going to fix the exchange rate, is this just a move to making it more freely
7:20 pm
floating? or are they actually going to deliberately push the currency lower? within the next couple of hours, we'll know whether or not they're going to announce a further depreciation or devaluation or if they're going to just make the yuan a little bit more freely floating. with the industrial production and retail sales numbers, provided that those aren't significantly worse than what people were expecting, i think it will send the message that this was indeed just one of the many mini steps that the chinese government is taking to try to be a bigger player on the global markets. angie: was there a particular sector, a specific industry that got a little bit oversold in your opinion? very quickly. guest: yeah. i think materials actually got really oversold here. because of the effect on commodities. people read too much into this as saying that this actually is portending worse growth numbers from china. so if we don't see worse growth numbers we could see commodities
7:21 pm
move back higher and materials will likely follow suit. angie: ok. thank you so much for that. it is a story we continue to watch. brian jacobson. thanks so much for that. wells fargo advantage funds. stories making headlines around the world. dutch prosecutors say parts of what could be a missile have been found in the wreckage of the malaysia airline's plane that crashed in ukraine. the announcement is the first time streggetters have confirmed possible evidence that the plane was shot down. all 298 people onboard died when mh-17 crashed in july last year. prosecutors can't say who fired the missile but say it appears to be a russian-made system. the search for malaysia airlines stepped up. land and air searches off the coast of reunion island. the patrols followed the discovery of the piece of wing that probably came from the missing plane. other indian ocean nations have been asked to carry out similar searches in case debris has
7:22 pm
washed up on their shores. it's believed it came down in the southern ocean and debris may have floated west. and picasso, a masterpiece has been handed back to spain. where it's considered national treasure and not allowed to leave the country. the picasso painting entitled "head of a young woman" was seized off a boat last month. it was painted in 1906 and the artist's period and has been valued at $27 million. it's owned by the brother of the late emeal yo, former head of a banking group. more news coming up after the break. greece agreeing to the terms of a new bailout in time to prepare a new payment to the e.c.b., all those details when "first up" returns. ♪
7:23 pm
7:24 pm
7:25 pm
angie: welcome back. greece has confirmed the details of a third bailout deal which opens the door to a payment to the e.c.b. but there is still a vast political process ahead. nd a tight timeline. reporter: after a few weeks of intensive talks, greece forged an initial agreement with its creditors on measures from pension changes to taxes. about $85 billion in funds. what happens next is national
7:26 pm
parliament's need to vote on the deal before an august 20 greek payment is due to the european central bank. what greece needs is the quick release of about $20 billion euros to create a buffer for its banks and to make loan payments before -- payments. before that can happen, agreements on the technical aspects of the deal must be followed with a political agreement according to the european commission. so it's over to the greek parliament to pass the package of reforms agreed with creditors before a meeting of area finance ministers. tentatively scheduled for friday. according to the newspaper, a draft of the memorandum of understanding contains 35 measures, including steps to clamp down on early retirement, opening up energy and pharmaceuticals markets and changes to taxes for shipping firms, among others. investors applauded the news with greek stocks rising for a fourth day. since the index slumped to a
7:27 pm
three-year low last wednesday, it rebounded almost 11%, making it the best performing global stock market in that period. greek bond yields also continued to drop with the yield on the two-year note falling below 15% in june. it was as high as 30%. the devil though is in the detail, expect more reaction from euro area countries as the specifics of the deal become apparent. angie: coming up, golden opportunity. after the break, a special report from western australia on why the precious metals slump opens the door for some. this is "first up." stay with us. ♪
7:28 pm
7:29 pm
7:30 pm
angie: it is 7:30 here in hong kong and the sun is out. casting its gleam on a shiny i.c.c. tower there across the bay. we are 30 minutes away from the open of trading in australia. japan and south korea on your tv, on your mobile and online. you are watching "first up." the top stories this hour, china's biggest devaluation of the yuan in two decades has sparked a chain reaction across
7:31 pm
the globe. u.s. stocks shrink 1% and the benchmark entered a bear market. the devaluation also weighed on commodities, pushing oil and industrial metals down. the pboc says a strong yuan puts pressures on export which is fell more than expected last month. crude tumbled to a six-year low on rising opec supplies and forced that devaluation of the yuan. more than 30 million barrels of oil were produced last month. that is the most in at least three years. iran has restored its output to the highest levels since international tanks sanctions were strengthened in 2012. and greece has confirmed a deal on the terms of the third bailout, paving the way for eurozone parliaments to vote ahead of an august 20 payment to the e.c.b. after two weeks of intensive talks, the two sides reached agreement on a range of measures that will unlock about $94 billion in aid. greek lawmakers must now enact 35 reforms including changes to
7:32 pm
shipping taxes and the retirement age. and opening up the energy and phrma sectors. let's check in on markets in asia right now. to new zealand where we are seeing stocks under pressure. china's one of their biggest, in fact the biggest trading partner for new zealand and we are seeing equities down on the heels of wall street's response as well to china's devaluation. new zealand dollar spot recovering a little bit. 65 u.s. cents. we're also counting down to the opens in australia, sna pan and korea. let's head over to japan. nikkei 225, closed under pressure almost all across the board here in asia. futures in chicago are pointing to a lower open. e have slightly stronger yen here. 15 spot. back to the yuan because the shock devaluation triggered chain reaction across all global markets. it affected other currencies and also equities and commodities.
7:33 pm
let's bring in our bloomberg news currency reporter. let's start with how currencies reacted. how did they do? reporter: hi. well, currency markets really reacted to this news and investors flocked to the u.s. dollar to seek safety after this move. asian currencies did not do well and neither did the commodity currencies. new zealand's dollar, the australian dollar and also norway's krona. angie: is china entering the currency wars? reporter: not yet. at the moment what china is doing it easing monetary policy and also allowing its currency to deval a little bit. and we can see similar behaviors have taken place in the u.s. by the e.c.b. and also by the bank of japan. right now what china is doing is trying to weaken its currency a bit, to help the exporters, to help boost growth, and to help fight against deflation. that's something that we've seen by many other central banks around the world.
7:34 pm
angie: ok. they're fighting deflation at home. but they're almost exporting it to the united states. one of its big export partners. so how does this affect the fed think being the rate hike? reporter: this is really interesting because traders are actually expecting that the september rate hike is around -- the probability is around 46% today. that's down from 54% on friday. so you can see that the expectations of the rate hike now have been scailed back a little bit because investors are simply worried about what this means for the global economy. they're worried about what the chinese move means for global growth. and also for global inflation. it might tamp down inflation, which then will make it a little bit harder for the fed to justify raising rates. angie: are there more interventions to come? reporter: this is a very interesting question and the jury is still out at the moment. we talked to a lot of people within the markets today and some of them have said that this is just the tip of the iceberg.
7:35 pm
that china will need to continue devaling its currencies and that this is part of a broader move. at the same time the pboc was pretty explicit, it says this is a one-off devaluation. and some people in the markets, including goldman sachs, are taking this at face value. they're saying that the currency may deval a little bit but it's not going to be part of a big plunge. angie: all right. we'll see. our bloomberg news currency reporter, thanks so much for that. the yuan devaluation as well as rising opec supplies pushed crude prices back down to a six-year low. let's go to our bloomberg news energy reporter in houston. what are the concerns here? reporter: one of the big concerns is that devaluation of the yuan. china has become, over the past couple of years, the most important crude market in the world. it's sort of neck and neck with the u.s. in terms of being the
7:36 pm
world's biggest importer on any given month. but while u.s. crude imports have been falling over the last little while, china's are just rising steadily. and so every oil exporting country in the world, from iran to saudi arabia, to russia, they're looking at these chinese markets and oil is denominated in dollars. worldwide. and so when the chinese government devaled its currency, 2%, that is in effect making oil 2% more expensive for every buyer in china. from the big national oil companies all the way down to people filling up gasoline in the streets. that's going to impact their demand going forward. angie: so then why is opec boosting oil production in an already oversupplied market? reporter: that's a great, great question. opec released its monthly report today. and it's a hundred-page long report that goes into every aspect of the world's oil economy and the global economy itself. and the one thing it doesn't really get to is why they would boost production.
7:37 pm
there's some seasonal reasons, a lot of the middle eastern countries burn crude oil in the summer months to fuel power generations for air conditioning, it's so hot there. and the biggest increases came from countries like iraq and iran, iran as you know signed a nuclear agreement back in july that's going to allow it to sort of slowly ramp up production toward the end of the year. opec basically -- its members don't want to get left out of the market share business. even with oil down in the $50's and $40's even. angie: very quickly, do you think opec is going to see the oil market falling back into balance any time soon? reporter: probably not. opec sees -- for all of 2015 they look at the global supply and they look at global demand and they think that opec is going to be needed to produce about -- a little more than 29
7:38 pm
million barrels a day. they're producing 31 1/2 million barrels a day this year. so -- and next year they're saying, you know, the world will need a little more than 30 million barrels from us. so unless they're planning on cutting production back a lot, there's going to be no balance any time soon. angie: all right. we'll leave it there. thank you so much for that, dan. let's check in on how commodities are trading this morning. and there you have it. gold continues to give back earlier gains. it's at the 11:08 spot, 60 per ounce there. silver, copper, which is a barometer for of course the mining index here. 233 spot, it's slightly strengthening. that is the view right now. but despite gold's recent declines, australian miners have managed to slug off the worst because the aussie dollar has been falling as well and the situation has offered rich pickings. us a yalia's evolution --
7:39 pm
australia's evolution mining has picked up two acquisitions and we paid them a visit. reporter: some more fresh gold pours into a depressed market. this 17-kilogram brick is being created in the gold room of evolution mining's newest asset, a mine in western australia. out here the appetite for gold remains as strong as ever. >> here's the finished product. despite recent falls in the stock price of gold, they're still smiling on australian miners. reporter: the aussie dollar's also usefully fallen. this is $1,500 an ounce. $1 whole brick, about 3/4 of million. this is the hole it came out of. a french miner began digging it in early 2013, just as the gold price began its sfeep decline -- steep decline. evolution shareholders voted almost unanimously to scoop up the mine, one of two recent acquisitions making evolution australia's second biggest gold producer. since november last year, almost
7:40 pm
a quarter of australia's gold production has changed hands. evolution's c.e.o. says foreign miners in general have been feeling the squeeze. >> most of their production is in u.s. dollars. which is tough to make money. it's mainly related to their position rather than, i think, the asset quality, which we think is terrific. reporter: it seems counterintuitive that these prices, but the mood around gold in western australia remains relentlessly upbeat. this month also saw the formation of the new gold industry group, to aggressively promote the metal as an asset. >> there's a level of optimism out there and i think the nature of the industry, but that's it. a lot of the gold miners at the moment are reducing gold miners, would be producing at a cost higher than the current prevailing price. reporter: as long as that situation prevails, the deal eems certain to keep coming.
7:41 pm
angie: time now for a look at some of the top corporate stories on the bloomberg terminal. reporter: we'll be watching shares later after their profit more than doubled last quarter to $119 million. india's biggest producer benefited from a one-time gain as it sold three noncorps assets. even so, sales tumbled nearly 20%. global steel makers are struggling with rising exports from china as demand in that market slows. shares in the state bank of india fell the most since january as more loans turned sour last quarter, climbing 54%. the share slump came despite the bank releasing earnings which beat estimates. net income rose 10% for the quarter to $575 million. india's largest drug maker missed estimates as it faces supply constraints and the integration of a competitor it bought last year. net income fell 60% and sales
7:42 pm
came in about 3% below forecast. last month investors were warned that revenue may be slashed or even fall after its acquisition of another company. they're trying to reverse a u.s. import bank on facilities. those are the top corporate headlines this hour. angie: coming up, china indicates it wants the market to set the level of the yuan. but our next guest says the government is nowhere near close to letting that happen. u.b.s.'s senior china economist joining us after this short. ♪
7:43 pm
7:44 pm
angie: checking other stories. u.s. prosecutors have broken up an alleged insider trading ring that relied on hacking corporate press releases before they were made public. they said hackers in ukraine accessed 150,000 releases
7:45 pm
passing them to associates in the u.s. who traded shares in boeing, h.p., oracle and caterpillar, among others. over five years the hackers infiltrated the servers of wire. five u.s. trade have been arrested with four more still being sought. and a 91-year-old retire surgeon has been charged with importing cocaine into australia and could face a life sentence. he's accused of importing 4 1/2 kilos of the drug in bars of soap found in his luggage after a flight from new dell i. he didn't -- in new delhi. it appears he was scammed by people he met online before his trip to india. and fifa has named swiss lawyer to lead its reform committee, as it tries to recover from corruption allegations. he was a director general of the i.o.c. when it dealt with the salt lake city bribery scandal. he'll deliver proposals to next february's fifa congress which
7:46 pm
will also select the successor. 14 officials from soccer's world governing body have been indicted by u.s. prosecutors on corruption charges. back to our top story. really the only story that everybody's talking about since it happened yesterday. china's move to deval the yuan sparking a chain reaction across global markets. let's join donna. senior china economist at u.b.s. it's very good to welcome you for a perspective on what everybody is watching today. because the first day was the critical move. but really now we're looking for hinlts of consistency, right? guest: well, we'll unlikely get that, i think. but yes. basically yesterday they said there would be two reference points that they'll use going forward which is, one, the previous day's market close. which our markets have seized upon. however, there was also a second reference point which is markets
7:47 pm
and supply. how they manage that will also be telling. we need to see whether they go from one extreme to the other extreme or strike balance in the middle. angie: who do you think's going to happen? guest: we think it's unlikely they'll err toward letting market forces decide exclusively. for one thing, that would be destabilizing for depreciation expectations. also for the capital outflow situation which we think only slightly moderated in q-. so these are also considerations. ultimately the other things that swung this move in the first place would be s.c.r. reviewers asking china for a better reference rate, which is why they said -- angie: that's a positive. guest: exactly. conveniently, for timing sake, exports aren't doing that great. ey're suffering from extreme trade weighted currency appreciation. angie: that is the market reaction to this negative hint. that perhaps there's more negative hints to come. retail sales and we've got some
7:48 pm
other key data coming out of china later this week. what do you think's going to happen? guest: just this afternoon basically. we've got i.p., retail sales. etc. we think that it's a bumpy turn-around that china's trying to engineer right now. in q-2 we saw a relative stabilization of growth which we think will hold before slipping down again. but just getting into that continuation is going to be quite tough. i.p. we think may have weakened slightly. but still hold up above the average that was in q-2. investment, we think infrastructure similar to june should have continued to stay quite robust because of the recent funding support. but we do think that property numbers, especially construction sites, will stay weak. but we've already seen exports that do that great this weekend. angie: is 2% enough of a bft for exporters? guest: if you compare that to, for example, what brazil, what japan's done in the last year, year and a half on certain days,
7:49 pm
it's miniscule. i think that the scale of it was shocking. and unexpected. because of china's own past trend. exports -- it will buy exporters more room to breathe but in terms of fundamentally, is it going to save china's export engine and take it back to the state we had before 2007? unlikely. it does help. but it's not the central fundamental driver behind the move. we think fundamentally it's the step toward longer term marketization of the currency. which in term would satisfy the bid. at the same time we've also got pressures at home, having a slight degree of depreciation in the currency helps deflation numbers too. angie: absolutely. it exports dip disinflation to the u.s. is what everybody's been saying as well. guest: exactly. it's flipped in terms of exports were really strong. there were inflation pressures. and capital outflows were still accelerating rampantly.
7:50 pm
then now it would not have such a good time. angie: do you think i.m.f. is going to include china's yuan into its s.d.r. basket? guest: in november we think chances are reasonable, actually. even despite the recent equity market correction. the equity market correction was uncomfortable. but perhaps it's better that it came this year rather than next year. after the inclusions were fully under way. instead it's now actually probably likely to make people more cautious but a more cautious approach doesn't mean they stop doing everything in terms of opening up the capital account. opening up more gradually and with more caution is perhaps better for china's economy. because domestically, financially at home, there's still a lot of refunds going on. structural imbalances affects the rest of the economy where domestics are weak. perhaps it was a blessing in disguise. a double-edged sword. angie: indeed. it was a very sharp one too. thank you so much. pleasure talking to you about
7:51 pm
the yuan. big story of the day, u.b.s.'s senior china economist. we have breaking news out of japan. let's get over to tokyo for all the details. this is crossing our bloomberg terminal wires right now. reporter: hi there. let's talk about those numbers hear real quick. it looks like we're continuing to see producer prices in negative territory in japan. that number for on year coming in at 3%. economists were expecting a 2.9% fall. so bigger than expected. this is three straight months of decline. this could be the biggest drop we have seen in nearly six years. so a year after this global financial crisis and japan picking up the pieces, it looks like those numbers similar to that time. we did see those numbers fall 2.4%. the minutes coming in right now. we could see that the b.o.j., these are the ones that are coming in from the july meetings, saying they will
7:52 pm
continue to check risks, adjust policy as needed. but they said that easing is exerting the intended effects. inflation intended to rise. going back to p.b.i. numbers real quick this does reflect a pronounced fall in oil prices that we've seen since the end of 2014. if you take it from a month to month basis, which those numbers coming in right now, this could be a more accurate understanding of how the current inflation is looking right now. the month to month numbers for p.p.i. coming in at -- falling, 0.2%. the estimate was coming in at 0.1%. so again, the fall deeper than expected. this of course due to those weak oil prices. but some economists do expect that that will edge out for the month of august. we could be back into positive territory by then. this month to month increase, if we see it before august, that's going to reflect the stable oil prices, stronger investment demand in the third quarter, and the bank of japan governor has
7:53 pm
mentioned before he is looking past these current oil induced prices. but the b.o.j. minutes saying that inflation expectations are lower, that's according to one member, but they did say the ales tax effect on the cbgi,.2%. so we're talking about on thursday as well. because those machine orders coming outs from japan, that is also expected to come possibly in negative territory as well after three months of acceleration. those numbers will be huge coming in on thursday. back to you. angie: live in tokyo for us there, thanks for that. still to come on the show, we're going to take a look at the prospects for one japanese oil producer. "first up" back in two. ♪
7:54 pm
7:55 pm
angie: welcome to the stock exchange. we're taking a look ahead to the opens in australia, japan and
7:56 pm
south korea and our reporters are here to tell us what stocks they're keeping an eye on. fugi oil profit rose 11-fold. still slumped 50%. so not really quite sure what it's going to do today. i think analysts are also pretty divided. it operates mining and refining facilities for crude oil, natural gas, it exports petroleum products but not not sure if it exports to china which would make a difference with the yuan falling. guest: i'm not quite sure there. fell 7% last week. angie: ok. could see more moves today. guest: i don't know why it's named this way. it's a property developer in japan. a few things. they're raising their divind. they're going to be raising some cash as well. they're selling new shares. the stock split 4-1 effective in october. a lot to consider. they're adding 10 yen for a commemorative dividend to its year end, bringing that to 50 yen a share. my bet it's going to go up,
7:57 pm
very, very up. angie: them's fighting words. the verdict from the stock exchange, stocks are reported -- highlighted based on news events.
7:58 pm
7:59 pm
8:00 pm
john: i'm john heilemann. mark: and i'm mark halperin. and with all due respect to rick perry, this one's for free. ♪ mark: on the show tonight, clinton, perry, paul, and cruz, but first, trump. he is ahead in the new poll today as we have seen, he , dominates. the latest democratic strategy -- latest republican strategy is to talk about hillary clinton. jeb bush plans to hit the big front runner in excerpts. he is quoted as saying isis grew while the united states disengaged and ignored the threat. and where wacr


info Stream Only

Uploaded by TV Archive on